Sri Lanka’s Turmoil – The quest for influence

Indo Chinese rivalry may have caused dissonance in Sri Lankan politics after President Sirisena replaced Prime Minister Ranil Wickremesinghe by Mahinda Rajapaksa, a Chinese protégé. 

Background

On 26th October 2018, Sri Lankan President Maithripala Sirisena dismissed Prime Minister Ranil Wickremesinghe and swore in ex-president Mahinda Rajapaksa as the new Prime Minister. The dismissal ended the coalition government that was formed in 2015. Sirisena and Wickremesinghe had differences over several vital issues, including the handling of the relationship with two of its Asian neighbours — India and China.

Sri Lanka lies off the southern tip of India, located in the Indian Ocean. The island is historically and culturally intertwined with the Indian subcontinent but is geographically separated. Located just 23 kilometres (14 miles) off its southeast coast, India sees Sri Lanka as a bulwark in its military defences to ward off potential Chinese incursions and also sees the island as a key partner for regional trade.

For China, Sri Lanka is a critical link in its massive Belt and Road Initiative, which aims to use infrastructure projects to expand trade across a vast arc of 65 countries from the South Pacific through Asia to Africa and Europe. It has handed out billions of dollars in loans for Sri Lankan projects over the past decade.

Analysis

 

China and India are closely monitoring the unfolding of the constitutional crisis in Sri Lanka, which has been a theatre for geopolitical influence in the Indian Ocean region. Chinese and Indian diplomats have been careful not to overtly take sides in the political turmoil, which has seen President Maithripala Sirisena oust Prime Minister Ranil Wickremesinghe, and replace him with pro – Chinese votary, Mahinda Rajapaksa.

India has grown circumspect of China’s economic influence over Sri Lanka and was perturbed by a 2014 port visit from a Chinese submarine and warship. Chinese companies are constructing a $1.5 billion new commercial district in Sri Lanka’s capital Colombo, including hotels, marinas and a motor racing track. They have already built a giant container terminal nearby and a huge port in the south. There is a growing Chinese community of about 12,000 expatriates scattered in Colombo and Hambantota. India’s fear is that Sri Lanka could eventually become a Chinese military outpost.

The disquiet between President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe was about how far to accommodate Indian interests. Wickremesinghe who was dismissed on Oct. 26 spoke about arguments at a cabinet meeting chaired by the president over a proposal to grant development of a Colombo port project to a Japan-India joint venture. Wickremesinghe insisted that the ultimate decision should respect a memorandum of understanding signed between India, Japan and Sri Lanka.

India had been pushing Sri Lanka for the award of an estimated $1 billion contract for a second foreign-operated container terminal in Colombo. It has pointed to a memorandum of understanding (MOU) Sri Lanka signed in April 2017. The MOU laid out a blueprint for projects India would be involved in, including an oil refinery, roads, power stations and the container terminal. The agreement also includes room for Indian involvement in the development of industrial zones. 

The cabinet meeting was supposed to give clearance for the project but President Sirisena said the country, already mired in $8 billion of Chinese debt, couldn't give any more of its assets to foreigners. Wickremesinghe who forged close ties with India and Japan said that the pact with India was approved a year back.

China has been constructing ports, power stations and highways in Pakistan, Bangladesh, Sri Lanka, the Maldives and Nepal, much of it now tied to its ambitious Belt and Road Initiative to connect China with countries across Asia and beyond. U.S. Vice President Mike Pence's warned that China was using "debt diplomacy" and the Hambantota port in the south could become a Chinese forward military base.

Sri Lanka’s debt tripled during Rajapaksa’s presidency according to Sri Lankan Central Bank figures. New Delhi and other international critics have called the loans a debt trap. Central bank figures, however, show that Sri Lanka’s debt to India stood at 145 billion rupees (about $19.9 billion) in 2017 versus 135 billion rupees (about $18.5 billion) owed to China the same year. If projects in the Maldives are cancelled, Sri Lanka would be China’s main Indian Ocean link between Asia and Seychelles, off the coast of East Africa.

Assessment

Our assessment is that the present intransigence in the Sri Lankan polity is primarily due to India – China rivalry in the Indian Ocean region. We believe that India can ill afford to ignore the strategic advantage China has gained in Sri Lanka so close to peninsular India. India is aggressively seeking to create a leverage in the Indian Ocean by pitching for projects next to Chinese investments, so that the latter’s military does not enjoy free access to pursue its ambitious Belt and Road Initiative to connect it with countries across Asia and beyond.